The Employee Retirement Income Security Act of 1974 (ERISA) is federal law that regulates employer-sponsored health and welfare plans of all sizes – both fully-insured and self-funded. To ensure group health plan compliance, federal agencies such as the Department of Labor and the IRS are tasked with enforcing ERISA and its related laws, including HIPAA, COBRA, and now the ACA. Despite the complexity of these laws, employers can take steps to prevent the costly consequences of noncompliance. An ERISA gap assessment can serve as the first line of defense by identifying areas of weakness and addressing vulnerabilities.
Ideally, a general assessment should be conducted on an annual basis. An annual review will allow an employer to preemptively identify and voluntarily correct noncompliant practices. Additionally, a gap assessment will prompt the review of record keeping systems and various contracts with insurance carriers and third-parties, which can yield the more tangible benefit of efficient and cost-effective plan administration. Assessments should also occur upon circumstances such as business reorganization, changes in administrative personnel, or frequent participant complaints.
A typical gap assessment will entail the review of required notices and disclosures. These include notices due to employees and participants, as well as annual reports submitted to the IRS. An assessment will also require the plan sponsor to evaluate its recordkeeping and documentation practices. How smoothly the review of required notices and disclosures was conducted will likely be an accurate indicator of the quality of these systems. Finally, a thorough analysis of fiduciary best practices will examine whether the plan sponsor acts in the sole interest of the plan’s participants.
A productive ERISA gap assessment requires time and close attention to detail, and the required commitment may seem impractical for some employers. However, sponsors of noncompliant group health plans face the real potential of various civil and criminal penalties, as well as private lawsuits brought by plan participants or employees. A trusted relationship with a broker can be a huge asset in the process of an assessment and overall compliance. Be sure to involve your broker in the process and utilize the resources offered.
The cost of noncompliance is simply not worth the risk.